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Re: Anti-PSR piece
Author: Earth Calling
Date: 12-01-2021 - 17:11
The railroad president runs the railroad? Where did you get that idea? The president is the CEO of the railroad COMPANY not the railroad. Yes the railroad is a tolerably large part of the COMPANY, but there are many other businesses the company is in besides railroading. Real estate is a big one. KCS at one time owned Janus Funds, which was eventually spun off when it became larger than the railroad (who spun off whom would be an interesting thought piece).
The President nee CEO works for the Board, namely the investors. He (almost always) is responsible for producing constantly growing income (yes, I know, that's the life philosophy of a cancer) for the investors who happen to dominate the Board which hires (almost always) him. Yes, the railroad is usually a large if not the largest component of the company, so it needs to keep throwing off cash, preferably in larger amounts each year. PSR helps to do that in the short term. And the long term even for a railroad company is still less than 5 years; it's hard to get most investors (including the Board) to see beyond the next quarter.
Side question for Webdigger: has there ever been a female president/CEO of a railroad company?
And finally, how do you think the President (and CEO, usually the same person) gets paid? Yes, they get a salary, but that's pocket change. Mostly, they get paid in stock, and the amount of stock they get is based on how well they grew income in the last quarter or year. That's supposed to incentivize them to keep the company's net income growing. Again, note that in the short term (which is still long term for investors) it's often easier to grow income by cutting costs (the main thing that PSR has been used for) rather than improving railroad performance and adding shippers.
Eventually, all railroads using PSR methods - essentially all the big ones, though it's called something different everywhere because NIH - will run out of costs to cut without shutting down the railroad entirely, which would be kind of extreme. At that point, railroad Presidents might place a little more emphasis on making the thing work. That won't happen for a while, though.
The President nee CEO works for the Board, namely the investors. He (almost always) is responsible for producing constantly growing income (yes, I know, that's the life philosophy of a cancer) for the investors who happen to dominate the Board which hires (almost always) him. Yes, the railroad is usually a large if not the largest component of the company, so it needs to keep throwing off cash, preferably in larger amounts each year. PSR helps to do that in the short term. And the long term even for a railroad company is still less than 5 years; it's hard to get most investors (including the Board) to see beyond the next quarter.
Side question for Webdigger: has there ever been a female president/CEO of a railroad company?
And finally, how do you think the President (and CEO, usually the same person) gets paid? Yes, they get a salary, but that's pocket change. Mostly, they get paid in stock, and the amount of stock they get is based on how well they grew income in the last quarter or year. That's supposed to incentivize them to keep the company's net income growing. Again, note that in the short term (which is still long term for investors) it's often easier to grow income by cutting costs (the main thing that PSR has been used for) rather than improving railroad performance and adding shippers.
Eventually, all railroads using PSR methods - essentially all the big ones, though it's called something different everywhere because NIH - will run out of costs to cut without shutting down the railroad entirely, which would be kind of extreme. At that point, railroad Presidents might place a little more emphasis on making the thing work. That won't happen for a while, though.
